Euro-bailout to send gold and silver prices much higher

Posted on 10 May 2010 with 5 comments from readers

Gold and silver prices advanced late last week in the aftermath of Thursday’s 1,000-point plunge in the Dow, and bounced higher in the immediate reaction to the near trillion dollar euro-bailout package on Monday morning.

‘Mr Gold’, Jim Sinclair explained: ‘A nuclear solution to Europe’s debt problems is simply another way of saying ‘Quantitative Easing to Infinity’. All national debt will be bailed out. All states of the USA will be bailed out. Paper currencies are headed to dust.

‘Regardless of the first knee jerk market reaction, gold is going to $1,650 and beyond due to nuclear suggestions of adding more debt to entities failing because of debt. This is the EU Helicopter Drop coming up.’

Money printing in Europe

Mr Sinclair is absolutely right. The Europeans have thrown in the towel in terms of austerity and are heading instead for the politically easier option of inflation through money printing. This can only be a positive for gold and silver as money that cannot be printed.

For democratic societies the austerity required for debt repayments is very difficult to muster. Note the riots on the streets of Athens last week. However, as Mr Sinclair often reminds readers of his excellent website there are consequences to a bailout, especially one this big.

There are no easy answers to high debt for nations. Debt can be inflated away or dealt with by default and devaluation. Inflate away debt and you push up the cost of goods and services while salaries fall behind.

However, the data that you get from your brokerage firm should be the most fast and accurate.

If you are instead using a free website on Crypto CFD Trader then it would have mentioned whether the data is live or delayed on the site. If it is delayed then you should avoid using it to place your trades.

If you are living beyond your means you will have to pay the price one way or another. You can delay paying debt, not avoid it.

Inflation ahead

So Europe is going down the bailout or inflation route too. Welcome to the club that the US, Japan and China have joined. This is not a path for healthy economic growth, if there is any. It means stagnation and falling wealth for many as the relative value of many assets to general price levels will fall.

The trick is to find the asset class that inflation actually benefits, and an increasing band of investors are waking up to the fact that gold and silver will fill this role. And as to those who think equities are the answer, the 70s’ precedent does not support that argument at all. Remember the 1974 stock market crash?

As ever the chart from Clive Maund is very prescient: